Jyothy Woos Urban Women to Raise Deodorant Sales Sixfold

A woman looks at bottle of "Ujala Supreme fabric whiteners", made by Jyothy Laboratories Ltd., at a shop in Mumbai. Jyothy, which started operations with its Ujala fabric whitener three decades ago, began diversifying in 2000 to add products such as household insecticides and kitchen utensil cleaners. Photographer: Abhijit Bhatlekar/Bloomberg

May 24 (Bloomberg) -- Jyothy Laboratories Ltd., the Indian
maker of fabric whiteners and dishwashing soaps, is targeting a
sixfold gain in sales of deodorants, vying with bigger rivals
such as Unilever to woo urban women whose incomes are rising.

Revenue from the Fa brand, which includes products for
women such as talcs and soaps, is expected to climb to 1 billion
rupees ($18 million) in three years from 150 million rupees,
Chief Executive Officer S. Raghunandan said. Jyothy plans to
boost spending on advertising the brand, he said.

Jyothy is counting on luxury discretionary spending to spur
demand for Fa products in India targeted at women as Euromonitor
estimates the market for deodorants will more than double by
2017. Still, it will face competition from companies such as the
local unit of Unilever, which had the biggest share of the
country’s deodorant market last year, and Reckitt Benckiser
Group Plc.

“Deodorants as a segment are growing very fast in India
and the Fa range is an international product that has a strong
brand recall here,” Raghunandan said on May 22. “It can gain a
big chunk of this market.”

The average annual income of an urban Indian woman
increased 111 percent over a decade to 2010, compared with the
100 percent growth in incomes for people living in the country’s
cities and towns, according to Mumbai-based market researcher
IMRB’s website.

Jyothy, based in Mumbai, bought a majority stake in the
Indian unit of Henkel AG, the German maker of Dial soap, in
2011. These businesses were operated by subsidiary Jyothy
Consumer Products Ltd., which has now been absorbed by the
parent.

‘Heavy Competition’

Jyothy gained rights to sell Fa in India, Bangladesh and
Sri Lanka with the acquisition. It pays royalties of 2 percent
of sales to the German consumer products company.

The market for deodorants in the world’s second-most
populous nation will increase to 38.8 billion rupees in 2017
from 15.2 billion rupees last year, according to Euromonitor.

“Lots of brands are there in the deodorant space,” said
Kundu. “At least in the feminine side, there is not much
competition. There are lots of deos for men, but there are not a
lot for women.”

Sales Expansion

Jyothy fell 2.1 percent to close at 179.70 rupees in
Mumbai, the biggest decline since May 17. The stock pared this
year’s gains to 10.5 percent, compared with the 1.4 percent
advance in the benchmark S&P BSE Sensex. Hindustan Unilever
Ltd., the local unit of Unilever, has climbed 12 percent.

The company, including the merged unit, posted a profit of
196.5 million rupees on sales of 11.04 billion rupees in the
year ended March 31.

Sales are expected to rise by as much as 25 percent this
year, Raghunandan said. The margin for its earnings before
interest, taxes and depreciation, will probably expand to 15
percent from 12 percent in the year ended in March, he said.

Profit will probably climb to 1.15 billion rupees in the
year ending March, according to the median of 10 analyst
estimates compiled by Bloomberg. Sales will increase to 14.96
billion rupees, nine analysts’ estimates show.

Growth Strategy

Raghunandan, who joined the company last year from Reckitt
Benckiser Group’s India unit, has consolidated the business by
lowering distributor and retailer margins, spending more on
advertising and raising product prices to improve profitability.

This strategy may not yield the desired results, according
to Vishal Jajoo, an analyst at Nirmal Bang Securities Ltd.

“Earlier, the distributor got a high margin and would push
more of Jyothy’s products,” said Jajoo. “Now, they are trying
to aggressively promote their products. The question is whether
the customer will actually end up buying it?”

Also, the major brands in Jyothy’s portfolio will require
significant advertising, and that in turn will put pressure on
cash flows, Jajoo said.

Jyothy, which started operations with its Ujala fabric
whitener three decades ago, began diversifying in 2000 to add
products such as household insecticides and kitchen utensil
cleaners. A year later, it started selling incense sticks.
Subsequently, it expanded the range to include herbal soaps,
detergents and mosquito repellents.

The company’s strategy of growth by using brands that have
come through an acquisition is similar to that of some
competitors. In 2009, Wipro Ltd. acquired rights to the Yardley
of London brand of beauty products in Asia, Middle East and
parts of Africa from the U.K.’s Lornamead Group. The purchase
gave Wipro an entry into the more profitable business of selling
premium cosmetics. Wipro has since spun off its consumer care
business into a separate company.

Still, Indians living in urban centers are indicating
higher discretionary spending for the year, according to
Nielsen’s consumer confidence survey for the quarter ended
March. Consumption of “small ticket” items will be encouraged,
while automobiles and homes won’t find that many buyers, it said
this month.

To win more women customers, Jyothy will sell its Fa range
of deodorants in smaller packets.

“We have reduced the size of the can so it can fit easily
in a handbag,” said Raghunandan.